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Post-FOMC SOFR/Treasury Option Roundup

US TSYS
  • Heavy FI option trade reported Thursday, two-way positioning that favored upside/rate cut insurance amid a strong carry-over bid for Tsys Thursday after the FOMC held rates steady and acknowledged inflation has eased Wednesday. Not only did 10Y yield fall below 4.0% this morning, but under 3.9% by midday -- to 3.8835% at midday (5 month lows) as market as markets fully price in the first rate cut at the March 20, 2024 FOMC.
  • Projected rate cuts for early 2024 gained momentum: January 2024 cumulative -5bp at 5.283%, March 2024 chance of rate cut climbs to -81.9% vs. -62% late Wednesday w/ cumulative of -25.5bp at 5.078%, May 2024 fully pricing in the first cut with cumulative -50.8bp at 4.824%, June'24 cumulative -76.8bp at 4.565%. Fed terminal at 5.33% in Feb'24.
  • Link to trade summary.

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